There are numerous predictions of gloom and doom circulating throughout the wine business these days. Much of the hand-wringing has been inspired by a couple of business-insider reports that indicate a) we are in the midst of a wine glut and b) growth in wine consumption has stagnated as millennials seem to be gravitating toward other adult beverages, particularly hard seltzer and craft beer.
Fear not, we’ve seen this play before. Let me address the glut first. After decades of consistent growth in consumption of 3 to 4 percent a year, growth was flat or down slightly, depending on who you listen to, in 2019. That dip, combined with increased vineyard acreage (especially in California), has left a considerable backlog of inventory heading into 2020.
The ripple affect is undeniable. Grape growers, conditioned to years of strong demand, were understandably concerned that the 2019 harvest was a hard sell. I would remind everyone that this is the nature of farming. In my nearly 30 years as a wine journalist, I’ve seen this cycle repeat itself more times than I can count.
Everyone should chill. Wineries will do what they always do in this situation and over time the glut will disappear, consumers will benefit from lower prices and demand will rebound next vintage. That’s my predictions. How will that happen?
First, many wineries will simply offer steep discounts on their unsold inventory and blow it out the door. Expect to see widespread discounting in grocery stores and wine shops over the next few months. The danger for wineries that choose this path is long-term erosion of their preferred price points. It’s a dance and some wineries are better at it than others.
Recall, if you can, the dramatic drop in prices during the Great Recession. You might also remember prices spiked quickly as conditions improved. That will happen again.
The other path some wineries will take is tricky but doesn’t erode a winery’s established price structure. That path involves rebranding some portion of the backed-up inventory. Don’t be surprised when you start seeing new labels abound in the $11.99 to $29.99 price range. You can bet much of it will be repackaged wines that typically sold for a much higher price under the parent winery’s primary label.
Snagging the bargains when shopping new labels with no established track record involves a little work. My favorite approach is to visit a store that does reasonably well with closeouts – in my case that is the California grocery chain Trader Joe’s – and assemble a case of wine that looks promising based solely on the significance of the stated appellation. With more generic appellations, picking good bargain wines is often just a matter of dumb luck.
After pulling together a case for evaluation, I immediately take it home and open every bottle. After tasting each wine, I note the two or three that stood out for me and return for a more serious purchase before the wines I liked disappear, usually never to be seen again.
This brings me to the issue of stagnation in consumption. First, some of it is to be expected with the introduction of new alcoholic beverages such as hard seltzer and hard cider into the market. There is increased competition. The wine industry is no stranger to competition and should be used to it by now.
Second, price is a factor. Wine prices have risen dramatically in recent years and we’ve noticed. No one should be surprised about resistance to ever more expensive wines. The solution to the glut, steep discounts and lower prices, should melt away some of the price resistance wineries are seeing now.
And finally, the notion that millennials prefer beer and other beverages is not much of a departure from the choices made by previous generations. Few young people start out with fine wine – especially expensive fine wine – before experimenting with beer, cocktails and other alcoholic beverages.
It has been my observation that young people gravitate toward wine as they get older, start families and begin to nest.
And that, dear reader, is what I see in my crystal ball for the wine biz in the year 2020.
Follow Robert on Twitter at @wineguru.